Got SaaS? Web-based software will dominate supply chain in five years

In the future - specifically by 2015 - web-based supply chain software will dominate the landscape. This prediction from Dan Gilmore, the editor of a major supply chain publication. There's a link to his article later in this post.

Gilmore makes a lot of predictions about the supply chain in five years forward. The prediction Gilmore is most confident about, he says, is that web-based supply chain software will dominate the landscape. Very soon, there will be a tipping point then all come tumbling after: getting SaaS solutions to manage the supply chain.

For more on SaaS, please see this post on the Supply Chain Data Management blog. It's called "SaaS for Supply Chain: making ERP-osaurus modules extinct?" It's particularly useful for its reference links. And here's some specific data, for perspective:

Outsourcing just MSDS Management to a SaaS provider: expect 136% return

If outsourcing just the MSDS data management portion of the EHS Responsibilities, expect a 136% return. In a previous post, the Supply Chain Data Management blog analyzed a case study for outsourcing MSDS management to a SaaS EHS Compliance provider. Calculations show an ROI of over 136% per year, conservatively, for outsourcing the work... that means fewer headaches, and money back. The 136% ROI figure does not include additional benefits of outsourcing such as:

* risk management in avoidance of fines associated with outdated materials data or HazCom documents
* leaner processes due to just one central data hub with no need to store paper versions
* no product shipping issues around not having the MSDS or not having it in desired language
* no IT cost of building / maintaining inhouse MSDS data center

If it's so great, why isn't everyone doing it? In fact, more and more companies are outsourcing their materials data management -- because it's no longer reasonable to approach regulatory compliance in-house. For instance: See one SaaS company's client list, for reference.

SaaS: America's next top model?

Last fall, the esteemed former-AMR Research blogger, Bruce Richardson, ran a hot blog on the topic of SaaS.

Richardson quoted the "techie's favorite" tech blog, GigaOM as saying the following about SaaS:

“Traditional legacy applications such as Oracle or SAP have a fully loaded cost of delivery of $1,000-$1,500 per user per month."
"Several years ago, Oracle On Demand got that cost down to $50-$100, whether it was Oracle-hosted or customer-hosted."
"Salesforce.com has squeezed that cost down even more to $7-$10, though admittedly just for the much lighter-weight CRM portion of the suite."

Is SaaS really that much cheaper -- one-tenth the price?

GigaOm's quote has a massive cost gap. Let's say it's exaggerated, to stay on the conservative side; still, there is a gap, and SaaS makes more dollars and sense.

It seems transparent that on-demand solutions really are less costly in full deployment. They're quicker to ignite, easier to maintain, and more flexible in that they work with any and all legacy software, and there's never any hardware or software to purchase or maintain. Plus - SaaS is a service: like any service, you can cancel it if not satisfied. So it frees up not just spending but the onerous consequences of getting involved with a large ERP system, say, or other client-server oriented IT. SaaS frees up an organization on more than one level. And in today's global and shifting marketplace - freedom = agility = ability to react, adapt, and manage change is critical for economic viability and risk management. SaaS is the yogi of enterprise software. "Bendy," as this blogger's nephew likes to say.

The rebuttal to SaaS seems to be that analysts underestimate the relationship a traditional legacy app provider has with a company. Nay-SaaS-ers say that you can't put a price tag on the ERP-customer relationship (well, arguably, here's a price tag: the industry-average 22% annual maintenance fee, consulting hourly fees, extended SOWs, and incredibly costly enterprise-wide upgrades - especially the upgrades needed to get the new environmental compliance module...). Aside from those parenthetical price tags, though (!) the ERP-customer relationship is, I guess, priceless. Or something.

Certainly a SaaS provider also has a relationship with its customers. It's not as constant -- and shouldn't need to be. It's arguably not as dominating either: it's expensive to bring in all those consultants to tell you what to do and how to do it.

Plus, with the on-demand model, there's more free market and competitive spirit. Which is another reason that analysts like SaaS's chances. SaaS simply has to be good, and providers must stay on top of their game. Or people will just switch.

All those things will make SaaS the next super-model in software.

Shakedown

In the end, there will have to be a place for both, because SAP and Oracle rule the world and they are not so very much on-demand. Best Value is most-likely-to-succeed in the long run.

SaaS is a relatively new phenomenon; even though some providers, like Actio Corporation for instance, have been making exclusively SaaS software for over 10 years; the IT acceptance is really just now catching up with it. We forget how young the software industry really is.

The market will shake it out; Gilmore predicts five years till shakedown.

There was a very nice blog post last October about SaaS vs. ERP: Best Value vs. Least Costly -- around the subject of software maintenance contracts. Thoughtful piece on TCO (total cost of ownership) and 3rd-party maintenance contracts vs. services by vendor. Blog post is by the one and only industry insider Josh Greenbaum and as with (almost) everything he writes, it's worth a read.

Back to our supply chain. One big voice out there in supply chain strategy is is Dan Gilmore, Editor of Supply Chain Digest. Gilmore says that the market will endorse on-demand services over any other by 2015. His rumination on supply chain came in a newsletter containing the top ten changes we'd see in supply chains by 2015.

Gilmore says, "Web-based supply chain software comes to dominate the landscape: I haven’t completely been on this bandwagon until recently, but by 2015, this is how it is going to be – which has many major implications. More confident of this than about any other prediction on the list. Once this becomes the lead approach for almost all vendors, the shift will happen rapidly."

Looks like web-based (can we all it saassy?) software is about to take off. If you have questions about SaaS and supply chain materials data management, please contact the supply chain data management experts at Actio.

Meet you on the runway.

Got SaaS? Get Actio.


(sassy image courtesy www.photos8.com)

Got SaaS? Web-based software will dominate supply chain in five years

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